Growing up, Blockbuster was the place to go to get videos. When I was a kid, we’d drive down to the now-shuttered big, bright corner store in Santa Monica to pick out movies to watch. Later, in college, I patronized Berkeley’s local indie shop Reel Video (also now defunct) on the rare occasions that I wanted to rent something. But by my junior year in college (2003), I—along with millions of Americans—discovered Netflix, and happily devoured as many films as I could.

In other words, I pretty much haven’t thought about Blockbuster in well over a decade—and yet, the tenacious company is still out there. (There’s one just around the corner from me in Oakland!) Oh, how the mighty have fallen.

It was just a year ago that Blockbuster announced it would be offering a mailed DVD and streaming movie service (yes, à la Netflix) as a way to go head-to-head with the California company that has re-defined how we consume TV and movies.

Blockbuster lost $13 million last quarter

When Blockbuster declared bankruptcy in 2010, Dish Network swooped in within a year to acquire the video rental chain for $320 million. The plan was that by using the footprint of those stores, Dish could sell mobile devices to stream Blockbuster movies. But the Federal Communications Commission has been taking longer than expected in deciding whether Dish should be allowed to use its satellite spectrum for that purpose.

“You make a lot of mistakes in business,” Ergen, Dish’s founder and chairman, told Bloomberg, in an Oct. 3 interview. “I don’t think Blockbuster is going to be a mistake, but it’s unclear if that’s going to be a transformative decision.”

In the company’s most recent earnings report, Dish reported that Blockbuster lost $13 million in the second quarter of 2012, a loss that was attributed to “a result of lower monthly revenue and higher inventory costs per unit relative to the fair value of the inventory costs per unit acquired in the Blockbuster Acquisition.”

In short, Blockbuster isn’t making money. (Surprise!) To add insult to injury, Dish is also currently facing three patent infringement lawsuits against Blockbuster.

The slow, decade-long decline

Long before the bankruptcy, Blockbuster had been struggling to regain its footing. It launched its own Netflix-style clone in 2004. It got hit with a lawsuit by Netflix in 2006 (they settled a year later). More recently, Redbox and Verizon teamed up to go against the big yellow giant.

Dish has already begun closing stores—the company says it still has around 900 stores, which is of course a far cry from the 9,000 stores the company had in 2004. So, as a result of the federal regulatory delay, Ergen told Bloomberg that he’s reconsidering that entire plan.

“When your lease runs out on the stores, you can’t re-up because you can’t make enough money from just selling DVDs,” Ergen said.

The founder also said that buying Blockbuster was originally not very risky. The worst-case plan, he said, was to simply liquidate the company. When Blockbuster was acquired, it had $100 million on hand, and 1,700 stores. Selling the whole lot, Dish estimated, would yield about $300 million.

“There was very little risk in buying,” Ergen said. “Worst case we break even or make a little bit of money.”

Whether that plan—in late 2012—is still viable, is another question. Meanwhile, I’ve moved on to Hulu and iTunes.

102 Reader Comments

It's a little bit sad, but completely expected. Most companies as pervasive as blockbuster was in the 90s tend to make you hate them, but I never hated blockbuster. Sure, their definition of "new release" was always a bit perplexing, but overall they provided a good service. I think that their brand is still going to be worth something as a result.

This is ultimately yet another lesson to all large and pervasive companies. Never stop innovating.

Just add another company to the RIP list. Just like AoL, Blockbuster lacked the forward vision to realize/accept where the market was moving and seriously put the effort to invest in that move, even if it meant acquiring Netflix while it was still young and impressionable.

It's a little bit sad, but completely expected. Most companies as pervasive as blockbuster was in the 90s tend to make you hate them, but I never hated blockbuster. Sure, their definition of "new release" was always a bit perplexing, but overall they provided a good service. I think that their brand is still going to be worth something as a result.

This is ultimately yet another lesson to all large and pervasive companies. Never stop innovating.

Sometimes going in there and seeing 2 year old movies still on the "New Release" shelf (which was of course extra $$) infuriated me. I honestly never once used a Redbox until around 3 years ago, but once I did, I never looked back. Selection sucks, but can't beat the price.

Dish's biggest mistake was trying to tie Blockbuster's online video streaming service to their own. When they announced this during their press conference, I knew it was going to be a death blow to Blockbuster. Sorry, but the reason Netflix is kicking your ass in the online space is because they don't force me to switch to satellite television in order to use it.

I hear THAT, kvn. Same problem up here in Canada. They never had an up to date selection of new releases, they were always old but still on that list. And the games? please. There was never anything worthwhile. Netflix is awesome, even though we don't get as much as our US brothers and sisters, I'll still happily pay 7.99 as opposed to 80+ for cable with channels I neither need nor want and waaaaayyyy too many ads. And then if you've got a VPN, well...

Another victim of the Obama economy. If they can survive through inauguration day there are brighter skies ahead.

As much as I don't like some of Obama's economic policies, you can't pin this one on him. This is squarely on the management of Blockbuster and, now, Dish Network. This is what happens when you don't innovate and try to simply "get by" with the status quo. Those who don't adapt die.

For me it was Major Video. I hated when Blockbuster took over as they dumped all of the unrated films Major Video had. For a long time Blockbuster wouldn't carry unrated films. That was a killer for a kid that loved horror films the way I did in the 80's when the MPAA went insane and made almost any violence and sex in films an X rated offense. So, getting a hold of the unrated versions was a must. Honestly, try watching the R rated version of The Toxic Avenger some time and see just how much is cut out of what's meant to be a low brow comedy with gore.

I was so glad when Netflix came along. No late fee crapola, product shipped right to your door, and if yoiu watched the movies the same day then mailed them the next you could easily go through more movies for $8/mo than that same money would net you at Blockbuster. Blockbuster waited far too long to get into the on-line game, and now it's biting them in the arse. I have no pity.

With Blockbuster gone, I wonder if there's even a niche left for the locally-owned rental stores to fill anymore.

Most Mom and Pop stores have an adult section (I guess some people still haven't heard of the Internet). I'm guessing Netflix just doesn't want to be associated with the possible risk of renting X rated material. In person, you can generally tell who's 18 and older. On-line, little Johnny can just use Dad's CC to pass the age verification and parents groups would sound off long and loud.

With Blockbuster gone, I wonder if there's even a niche left for the locally-owned rental stores to fill anymore.

You know, there are a couple of really great video rental stores here in Toronto, one is right next to an ice-cream shop, the other one sells ice-cream and coffee. They have a bizarre selection of movies along with the top-40 stuff, and some really creative ways of showing movie collections.

Amazingly enough they have a ton of foot traffic. It's a go-to place on friday nights for a lot of people, even though they can very well get them at home on their own.

I think there's room for these stores, but only in parts of the city that fosters community, walking to get groceries, and just generally being neighbourly, since they don't attract the kind of clientele that drives to rent a movie.

I was never a willing customer of Blockbuster's, they just made all the alternatives disappear through back room shenanigans. I finally got fed up and swore them off over a decade ago over bogus "extended rental fees" during their "end of the late fees!" or whatever the hell they called it era. Then to add insult to injury, I got coupons for free rentals out of the class action suit that inspired.

By that time there was nowhere else to rent from. Good riddance I say.

I have loved watching Blockbuster in its death spiral, i fucking loath that company as much as AT&T and Comcast and Direct TV. The customer service of these company's is awful, i only hope the others have a similar fate. Although with AT&T and Comcast getting corporate welfare they are likely to keep growing unfortunately.

With Blockbuster gone, I wonder if there's even a niche left for the locally-owned rental stores to fill anymore.

As long as it's not a corporate behemoth that can be flexible it can adapt to any market. A business like this needs to give customers a reason to come in. Locally we have a http://www.moviemadnessvideo.com/ that's amazing.

With Blockbuster gone, I wonder if there's even a niche left for the locally-owned rental stores to fill anymore.

Funny that: I think small local stores are exactly what's needed to fill the remaining niche.

I think I'm the only person on the planet who's never had a Blockbuster membership, or even been in a Blockbuster. Why? Because where I grew up and went to college had a couple really great local video stores that, while certainly pinched first by large corporations like Blockbuster and then by the rise of streaming services, have always managed to reinvent themselves and survive just fine. What mom and pop shops can do that Blockbuster cannot is react quickly to what their customer base wants, and do so at the fringes. One of the stores in my old home town added a curated, "no shame" XXX section, and expanded their foreign film section; another added a huge anime section -- all as a way to draw new, loyal audiences.

With Blockbuster gone, I wonder if there's even a niche left for the locally-owned rental stores to fill anymore.

There's a rental store near here that's outlasted our local Blockbuster (and Hollywood Video by a number of years) and is still going strong--they even have a sign welcoming ex-customers of both chains to their store. Their strength seems to be that they stock interesting movies--not just the ones they know will be rented a lot--and they have knowledgeable staff who can give recommendations. Spend five minutes in the store and you're pretty much guaranteed to find something worth watching.

Netflix has all the same movies available, of course, but they're buried under a mountain of other titles and an automated recommendation system that still can't approach the sophistication of a real human being. If you're picky, finding something you want to watch on Netflix can be the work of hours.

Rental stores won't outlast DVDs, I imagine, but they could be around a while yet.

Eh, they deserved what they got. The late fee business ultimately killed them. Garner ill-will for years until people are ready for any real option and ditch you forever.

Unfortunately, Redbox and Netflix streaming have a great deal of room for improvement. The selection on Netflix streaming can be neat to find things, but it's not like you're just getting all of the NetFlix discs available as streaming. Redbox always seems to have 2 AAA movies as well as every movie the Sci Fi channel released 5 years ago. Again, lots of room for improvement. I'm sure it's cost effective for Redbox, but I'd sure go back more frequently if the selection was better.

We shouldn't be sad over declines like this. It's the way of life. During the VHS/DVD movie rental heyday, Blockbuster was the king. That heyday is over. It's not sad that Blockbuster couldn't transform into a completely different company. It is what it is. I'm sure many of the employees of those [9000 minus 900] closed stores have other jobs now, maybe in a booming new-tech sector. They may be doing great for themselves. Companies don't matter; it's the people.

Heck, Apple Inc. may die one day if we all move to a different technology that they can't do well. Such is life.

With Blockbuster gone, I wonder if there's even a niche left for the locally-owned rental stores to fill anymore.

There's a small video store in my area that is busy every weekend, has a good location for foot traffic and specializes in hard-to-find movies. Of course they've adapted pretty well, whereas the Blockbuster down the street is now an Urban Outfitters.

With Blockbuster gone, I wonder if there's even a niche left for the locally-owned rental stores to fill anymore.

You know, there are a couple of really great video rental stores here in Toronto, one is right next to an ice-cream shop, the other one sells ice-cream and coffee. They have a bizarre selection of movies along with the top-40 stuff, and some really creative ways of showing movie collections.

Amazingly enough they have a ton of foot traffic. It's a go-to place on friday nights for a lot of people, even though they can very well get them at home on their own.

I think there's room for these stores, but only in parts of the city that fosters community, walking to get groceries, and just generally being neighbourly, since they don't attract the kind of clientele that drives to rent a movie.

Agreed. There's one within walking distance of our place that has all kinds of stuff - both versions of Solaris, Revanche, Miller and Mrs. McCabe, documentaries (Good Hair), freakin STALKER for crying out loud - it's awesome. Go to the closest Blockbuster and they don't even have The Zero Effect.

With Blockbuster gone, I wonder if there's even a niche left for the locally-owned rental stores to fill anymore.

Actually, I'd argue there is a niche. Whether there's an audience to make it financially sustainable is another question.

There was a video rental store in Berkeley, CA called Reel Video. They had an eclectic, interesting collection of videos and DVDs to rent covering the gamut from the silent era to more modern movies, along with a heavy selection of European movies. Titles that will probably never make it to Netflix or Amazon or iTunes.

I never left that store without a rental in hand. There was always something that caught your eye.

With revenue lost to faster, more accessible services like Netflix and with little-to-no mainstream interests, it's likely the films will only be seen by students.

So, yes, there is a niche of nearly-unheard-of yet quality movies that are much more worthy of discovery than Adam Sandler movies or more remakes of Planet of the Apes or the Flintstones. But they are likely to remain undiscovered.